Livinglies's Weblog

BOTTOM LINE: Use of a nominee causes an irreconcilable cloud on title entitling the homeowner to recovery on his homeowner title insurance policy. If homeowners purchased title insurance, they were at the same time in the same closing agreeing that the names of MERS and Countrywide would be used, for example, but that off-record activity could occur subjecting the homeowner to multiple liability and multiple foreclosures on the same property, each of whom he was bound to honor. This is precisely the kind of “disclosure” the 8th Circuit and others have been talking about. On its face, it creates irreconcilable conflicts which cannot be cured. You can’t “agree” that today is yesterday or tomorrow and that therefore the terms are different from what is stated in your agreement. Nobody could follow that kind of disclosure but that is exactly what what has been done and it based upon that confusion that intermediaries with no investment in the funding of any loan are nonetheless getting the windfall of residential real property transferred from the legitimate owner (the homeowner) to the illegitimate thief that stole it. Anyone can claim the status of being an intermediary and thus anyone can claim collection on the note and anyone can foreclose on the property.

Fortunately the law in every state holds that only the holder in due course can collect on an obligation. Unfortunately for hundreds of thousands of homeowners and millions more to come, they are getting away with it anyway. The measure that would put up a giant STOP sign would be the recognition that ALL of the title companies that issued title insurance policies are now liable under the terms of their policy — and all of them have a duty to defend the title of the homeowner pursuant to teh terms of the policy.

I received a “Disclosure Statement” currently in use in Florida by MERS and Countrywide which has led me to consider whether there is a direct action against the Title Agent and Title Insurance Company (if the homeowners purchased homeowner protection at closing). The allegations of such an action would be in addition to all others that have been mentioned on this blog. The claim against the title insurance company would be for them to pay or fix the problem you have with your title under the terms of the title policy, and not just because their agent was negligent or fraudulent in the manner in which the closing was conducted (which is the subject of other causes of action.

First let’s look at the “Disclosure Statement” which essentially makes the following assertions:

• MERS is Mortgagee
• MERS is not the real mortgagee
• MERS is a private company tracking movements of your loan “as an alternative means of registering the mortgage lien in the public records.” [In other words an immediate cloud on title is created in Florida upon execution of such documents. The parties are admitting and acknowledging that off-record activity is intended to occur and will occur without notice to the world as what happened. It is thus an attempt to convert the judicial procedure of Florida into a non-judicial one — something that has been expressly rejected by the Florida legislature and courts]
• Countrywide has nominated MERS to be its nominee. There is no recital that Countrywide is, was or will be the lender.
• “Naming MERS does not affect your obligation to the Lender under the promissory note.” [Sorry, yes it does. This is like the bailment situations where the proprietor puts up a sign that says “not responsible for injuries or property loss.” They put the sign up because it works. Most people assume it states the law, period. But it doesn’t. Naming MERS as the Mortgagee and presumably naming Countrywide as the payee on the note creates a fatal flaw in the originating paperwork, especially when you consider the additional language on this “disclosure” document.]
• This document was accompanied by another document called “Servicing Transfer Estimates” which clearly must be read in conjunction with all other loan closing documents including the above “disclosure” in which it is understood that servicing rights (not the note or mortgage per se) are or might be transferred and that a company called Recontrust, Company, N.A. “has been designated as the Trustee for this loan” (although it doesn’t say who designated them, how they did it or when. This document also discloses that Recontrust is a “member of the Countrywide family of companies” which means nothing. We do not know if it is a subsidiary, an affiliate, a joint venturer or wholly independent in a consortium led by Countrywide or some other entity.

All of this brings us to “what is a nominee “and what is the effect of having a “nominee.” See Our Glossary Under Foreclosure Forms, as quoted below.

NOMINAL LENDER: SEE LENDER, ASSET BACKED SECURITY (ABS), CDO, Early Amortization Event

• See Nominee Trust Below
  
• good-question-on-who-do-you-owe-money-to
  
• mers-beneficial-interest-to-sue-cannot-exist-separately-from-other-beneficial-interests-in-the-note
• SEE PERSON AUTHORIZED TO ENFORCE
• A conduit or party acting as Mortgage Broker under false pretenses to the borrower giving the impression that it is has performed ordinary due diligence and applied ordinary underwriting standards to the approval of the loan, the appraisal, the borrower’s qualifications and ability to pay and the fees at closing. The Nominal Lender is the party named on the mortgage as the mortgagee and named on the note secured by the mortgage as the payee. It is usually a front for some larger entity or financial institution. In virtually all cases from 2001-2008 the party so named on the closing documents was a Nominal Lender. The nominal lender abandoned virtually all underwriting standards and assessment of risk of loss or default because the nominal lender was not assuming those risks. In all cases, the nominal lender had already pre-sold the or assigned rights under the mortgage and note before execution of the underlying documents (mortgage and note) or immediately after under the expectation and agreement, tacit or written, that the nominal lender would receive a fee or profit from closing the loan and that the actual funds would come from third parties involved in the securitization process eventually culminating in the issuance of ABS instruments. Thus the nominal lender lacks legal standing to pursue enforcement of the note or mortgage because the nominal lender has no financial interest in the note or the mortgage. It is equally true, however, that the claim under TILA, RESPA, RICO etc. might not be addressed to the correct party when the mortgage audit is completed and rendered with a proper request under RESPA for resolution. The nominal lender lacks legal authority to settle anything since it is no longer a holder in due course of the note or mortgage. In addition, the removal of the nominal lender from the actual underwriting and funding process probably extends the time for rescission indefinitely because the real parties in interest are never disclosed to the borrower. similarly it is unlikely that the nominal lender has the authority to negotiate a settlement or even execute a satisfaction of mortgage, since it cannot return the original note (see Lost, Destroyed Note).

Nominee Trust: See MERS

A nominee trust is generally described as being an instrument

• (a) in writing,
• (b) has one or more persons or corporations named as trustees,
• (c) has an identified corpus, (“Corpus” means the asset or group of assets that are subject to the terms of the trust. In the mortgage meltdown context the Corpus is one or more (probably all) of the following:

• (i) a particular mortgage, note or obligation related to a particular borrower and possibly a particular piece of property, generally a residential primary residence, generally but not always applicable in a non-judicial state where deeds of trust are employed in lieu of mortgages, (ii) a group of obligations (commonly referred to as a “pool” subject to a pooling and service agreement) relating to relating to but not necessarily derived from a specific group of borrowers, mortgages, notes, obligations and specific real estate, (iii) a group of obligations relating to commitments from specific borrowers, additional co-obligors arising from insurance, derivative indentures, credit default swaps, cross collateralization, overcollateralization and resulting reserves, statutory duties, and common law duties, (iv) a group of certificates issued to convey the ownership interest in the corpus to the owners of the certificates of mortgage-backed securities and (v) a resulting or constructive trust of all of the above wherein by operation of law and the employment of the single transaction doctrine and step transaction doctrine the entire trust includes as beneficiaries both the investors [current and past owners of certificates of mortgage backed securities] and “borrowers” (issuers and past issuers of mortgages, notes and obligations arising out of the securitization process, whether such issuance preceded the investment in certificates of mortgage backed securities or occurred afterward,

(d) has beneficiaries identified on a written schedule held by the trustees but not disclosed to the public, [in the mortgage meltdown context this would mean (i) the source of funds for the transaction {in the mortgage meltdown context, the source would be (as intended) a stacked successive group of individuals, trustees, investment banks, special purpose vehicles and investors as later changed, amended, altered or modified by insurance, collateralization, Federal Bailout and open or closed market trading on regulated or unregulated exchanges or shadow facilities}, and (ii) the source would be the issuer of the originating security (by operation of law) which would be the “borrowers” as identified in the originating “loan” documents. (SEE TILA, DISCLOSURE, RESPA: Borrower has a right to know the name and contact information of the lender, as well as all parties to the transaction and all fees and profits generated and/or received by all participants in order to assess the true value and cost of the “deal” the “borrower” was intended to execute at closing. It is a violation of TILA and other legal authority to hide and withhold this information. The creation of a scheme in which instruments are used as a pattern of conduct to hide and withheld the information from the borrower is by definition an intention to operate outside the requirements of laws governing mortgage lending and other forms of lending. It is partially for this reason that the right to rescind continues to run, the character of the transaction changes from issuing a negotiable instrument to a non-negotiable instrument, the defense of PAYMENT arises and that the transaction becomes, by operation of law a securities transaction involving a non-qualified issuer (the “borrower”) and a qualified investor neither of whom receives full disclosure.]

(e) contains various trustee powers as to corpus dispositions that can only be exercised when authorized by the beneficiaries. [Thus if U.S. Bank or Wells Fargo, for example, initiate foreclosure proceedings they must present a complete chain of authorization. This chain might include the unintended beneficiaries (borrowers et al) by operation of law].

The beneficiaries are the owners of the corpus for all purposes, including income, gift and estate taxation, except being the owners of record of the corpus. There is a Principal/Agent relationship between the Trustees and the Beneficiaries, and it is somewhat the reverse where usually in a Grantor Trust, the Trustee instructs the Beneficiaries on what he will/is allowed to do for them, but in a Nominee Trust the Beneficiaries direct the Trustee.

The nominee trust was conceived as an estate-planning vehicle to allow a decedent’s real estate to pass to beneficiaries without the necessity of it being probated, e.g., the undisclosed beneficiaries would be also be the trustees of the Nominee trust.

The trustees have liability in tort but not in contract if the trust has appropriate language stating that those dealing with the trust may look only to trust property when a dispute arises with the trustee and giving the trustee ostensible authority to deal with the trustee.

The reasons for holding title in such a trust are:

• Anonymity of ownership, [TILA and other violations]
• Ease of title transferability: you do not need to re-record a deed every time you want to change the percentage of interest in a property held by the trust, [See MERS]
• Avoidance of state recording fees for deeds and a transfer tax (formerly known as tax stamps). Regarding new deeds (you can allocate and change a percentage of ownership in Realty merely be amending the percentage of ownership in the Schedule of beneficiaries) [In the mortgage meltdown context one of the many errors made by the participants in the securitization schemes is that they applied estate planning techniques and instrument to mortgage loans. No such application was ever intended by any legislature and no such application exists, legally, under any doctrine of law. ]

Filed under: bubble, CDO, CORRUPTION, Eviction, foreclosure, foreign relations, GTC | Honor, Investor, MODIFICATION, Mortgage, securities fraud | Tagged: borrower, disclosure, foreclosure, foreclosure defense, foreclosure offense, lender, Lender Liability, mortgage meltdown, rescission, RESPA, securitization, trustee, Wells Fargo |